6 things you should know about company fixed deposits

I recently received a comment from a reader about investing in company fixed deposits, and I thought I should do a post about some important things to keep in mind while investing in company fixed deposits.Â So, here is a post with a few pointers on company fixed deposit.

Company Fixed Deposits

1. Company fixed deposits offer better interest rates than banks

You probably know this already but it is an important enough point to be on top of the list. Company fixed deposits will give you a higher return than comparative bank fixed deposits. This is because of the additional risk, for example the DHFL fixed deposit that was concluded a few months ago offered interest rate of 9% per annum, when the highest any bank was offering was 7%.

2. Additional risk

Company fixed deposits have higher risk than bank fixed deposits because these type of deposits are unsecured, if the company goes bust you will lose your money, and unlike banks, they don’t have any backing of the RBI. A lot depends on the performance and reputation of the company of course. A strong company that regularly pays out dividends and has no losses is perhaps a good bet, whereas a company that has made regular losses should raise eyebrows.

3. Company fixed deposits are rated by Rating Agencies

The rating agencies hand out ratings to the particular offering, and that can help you make a decision. For example, The Shriram Transport Finance FD scheme was rated tAA (investment grade) by Fitch. These ratings can help raise flags if any offering is rated low, and you can possibly avoid such fixed deposits.

There was a comment that asked what the RBI rating of a fixed deposit was, but RBI does not rate company fixed deposits, and in case of default by the company – RBI is not going to back them in any way.

4. Company fixed deposits may be unsecured

Company fixed deposits may be unsecured debt, which means there is no underlying collateral, and in case of default, you won’t get the funds back by selling off your documents.

5. TDS on Company Fixed Deposits

If the interest you get from the deposit is less than Rs. 5,000 in a year, then there won’t be any TDS on it. You can think about spreading your investments in multiple fixed deposits if you foresee a situation where your interest is going to be larger than Rs.5,000 from one fixed deposit.

6. You could keep a shorter horizon

Normally, aÂ higher time period will get you higher interest rates, but if you are not very comfortable with investing money in a company fixed deposit then you can select a shorter time frame like aÂ year.

Like most investing decisions, whether you invest in these things or not, and how much money you do will depend on your particular circumstances. If you prefer safety over everything else, then it is best to leave these things alone. If you have a moderate risk appetite then you might as well try investing money with some of the better known companies.

Are the credit agencies paid by the company to give them a rating. If so, wouldn’t that represent a conflict on interest?
In India, there are multiple credit rating agencies like ICRA, CRISIL and CARE.
They do not cover all the companies. So what would be your suggestion in case a company is only covered by one of the agencies or there is a wide discrepancy between the ratings of a company between 2 agencies ?

Also, is there a way to know when companies advertise about their deposit schemes? Since many times it would seem that,by the time word gets out, its almost end of the enrollment period.

When investing in companies fixed deposit check their debt to equity ratio, profit history , dividend payout, nature of business and promoter background.For a company , taking money from public is a better option than from banks.Their cost of funding goes down ( depending on the sector).Interest rate spread for a bank is 3-4 % points above their FD rates . So when a company takes money from public it makes no difference to their interest cost but makes their life easy.Though the FD is unsecured in nature it still has its rights.Better park your money with NBFC than just housing finance companies or divide 60/40 in favor of NBFC .

hi there…
im srikanth,basically im new to this fixed deposit terms…so first of all which one is the better way to invest ur money as fixed deposits upto maybe 3-4 lakhs and wat should be done to avoid higher income tax implications on this terms…and also u have also mentioned abt NBFC… ,i would like to know the meaning for that…..thanks

DEAR SIR,
I APPLIED FOR A FIXED DEPOSIT THROUGH “ICICIDIRECT.COM”ON 20/07/2010. MY APPLICATION NO- 7057736, THE MONEY HAS BEEN DEDUCTED FROM MY ACCOUNT, BUT SO FAR I HAVE NOT RECEIVED MY F.D. CERTIFICATE. COULD YOU PLEASE LOOK INTO THE MATTER AND INFORM ME AT THE ABOVE E-MAIL ADDRESS.
THANKING YOU.

Fixed Deposit (FD) is basically an investment made for a fixed period of time resulting in a higher rate of interest in return. This is best suited for investors with a low risk appetite and who wants to invest a large sum of money to earn a fixed rate of interest.

This is an excellent forum for knowledge regarding various finance instruments. I don’t why people in this blog give their FD numbers etc and ask to look into their matter. Its your problem
so take knowledge from this forum and ask directly to the concerned company and get it solved.
Simply Simple.

hi all…
i m srikanth,basically im very new in this, can any body suggest me what is a better option to invest as a fixed deposits upto 4-5 lakhs and also with lower income tax implications on that…..and if any one can give me a specific names about the companies would be more appreciated….thanks all for ur support..

Srikanth – All FD interest are taxable in the manner so that doesn’t make much difference. Here is a list of high paying fixed deposits, and you can see which bank is accessible and convenient to you and open a FD there.

Just a clarification. If the interest per deposit is less than 5000 per then there is No TDS. Doesn’t mean there is no Tax. You still have to assess the pay the tax. This is only for people who are not under the bracket for attracting tax. Others who are in the bracket attracting tax you can ensure that you pay it as part of self assessment instead of TDS.

Hope you are doing good. It will be great if you can clarify my concern.

Company deposit of NHB(National Housing Bank) is available which is providing 9.25% compounded annually (cumilative payout). The total amount at the end equals somewhat Rs 107250.

Now lets say I go for a bank fixed deposit which is 7.25%. Now this is compounded annually which amounts to Rs107449. So do you think going with Bank FD is better as compared to Company Deposit for this.

The difference between a company fixed deposit and a bank fixed deposit is that a bank one is regarded safer since bank failures are rare and RBI guarantees savings of up to Rs. 1 lakh.

Practically, however if you ask me what’s difference between the safety of the deposit of NHB and say Axis Bank – I don’t know the answer to that. If you want the higher return you can opt for it but you need to be cognizant of the higher risk. I usually say that people should spread around their investment, specially debt investment since there is no upside in that.

I seek your guidance.
I hv invested in Birla Power and Ankur Drugs & Pharma, both the companies are not paying interest as well as maturity amount.
What is the remedy? Is there any website or portal or grahak manch where we can lodge a complaint against these cos?
Also pls advise if approaching to CLB would help.

Hi all,
I want to sensitize the public against the malpractices being followed by the company Sejal alias Sezal, etc in offering company FDs at attractive interest rates of 15 % or higher…
I invested Rs 20k in Feb 2000 in a three year FD. On maturity of the same, I have got only the interest amount of around Rs 8.5k and the principal has not been returned.
I have tried to contact the company offices and their registrar, M/s Link Intime through post, e-mail, telephone, etc for the past three months, but there has been no response through any modes of communication.
I have complained to the company law board mumbai and the disposal is awaited.
So, ,please all those who have invested, try and get immediate redemptions, if possible…. and those who planned to invest….please don’t think that these FDs are good interesting earning tools.
So much so that the registrar, M/s Link Intime who manages several thousand crores worth of investments, doesn’t seem to care and reply to investors. So carefully scrutinize any type of investment with Link Intime and choose someone else. Additionally, the company now continues to offer new FDs under a new name Sezal or alias,etc..None of its e-mails work or are responded.

In the hope of preventing others to fall in trap of these crooks….
Himanshu

Mr Himanshu…We too are in a similar situation like yours. We had invested Rs. 4 k in Sejal Glass on 5 May 2011 for 2 years and we got partial interest in July 2013. The balance interest and principal still eludes us despite innumerable visits and phone calls to their Office. Like you said , they have not replied to my letters and emails either. If there is any ruling from Company Law Board based on your complaint , would request you to please share it, as CLB website is no longer accepting investor complaints.

We had placed an FD of Rs 50,000, with Helios and Matheson in June 2012 for 2 years. We were issued all the cheques regarding the interests as well as the original amount for presenting to the bank at appropriate times.
After maturity, in July 2014, when the cheque for the FD amount was presented it was not honoured and returned with the remark that the party had stopped payment.
After many attempts also the company site could not be opened. We are therefore not in a position to contact anybody from the company.
Could any one inform me the e-mail address of the person to be contacted ?
What are the options available for claiming FD amount ?

Hello Rachita, Reg. Helios Matheson, I am also in the same boat. Our FD cheque & interest cheques were stopped payment by company. I spoke with company person at Mumbai office (Rupesh). He promised that they are awaiting funds and will be cleared within 6 months. Asked me to send FDR, bounced cheques copies by scanning them. Also include bank charges proof. Email id: rupesh.b@heliosmatheson.com. We may have to wait. I wonder bouncing a cheque is criminal offence. How a company can do it?

i am also on same boat mine both cheques pri amt 30000 and interest cheque dishonored. i am issuing demand notice for it for taking legal action on it we must unite against such fraudulent company we need to issue demand notice with in 30 days of cheque dishonored

Hi Manshu,
I am new to fixed deposits and like to take up your advice. I have one lakh rupee that I have planned to split into 3 (40,40,20) and invest in DHFL, Tamilnadu power finance and Mahindra finance for 3 years. I have planned to take it on my wife’s name, who is currently not working, so that I can avoid paying any TDS. Is my planning is the best one? Is the company that I have chosen is the best companies in paying highest interest and security, based on their history? Can you please suggest whether I need to change my plan?

Hi, I have invested around 3.5 Lakhs in Unitech FD.
I am investing in this company from last 5 years. But each time I bought 1 Year FD only.
Like this, I bought 2 FDRs last year, they sent me interest cheque along with FD Document which got cleared. But after maturity when I deposited my FD bonds, they do not send me the principle amount. I am waiting since January 2014.
Can you please help what to do get my money back?
I am also scared after Sahara Scam.

Hi, I have invested around 0.5 Lakhs in Unitech FD and Ansal Api
I am investing in this company from last 1 years. But each time I bought 1 Year FD only.
Like this, I bought 2 FDRs last year, they sent me interest cheque along with FD Document which got cleared. But after maturity when I deposited my FD bonds, they do not send me the principle amount. I am waiting since June 2014.
Can you please help what to do get my money back?
I am also scared after Sahara Scam

I have a Unitech FD for Rs 1 Lakh and the 3 year FD matured in 12/2/2014. I have surrendered my FD immediately , but till now I have not received my principal amount back. Can you please help me how to get it back. All company phone lines , there is no response. Also no repy for my innumerous e-mails.

I did 3 fds of Rs.37000 each with M/s Ansal Properties And Infrastructure ltd . New Delhi and the maturity of my FDR’s were on 18/4/14. But inspite my countless reminders I have not RCD. My maturity amnt till date.. Pl.help me out to get my money back. Thanks

Hi All,
If any one interested in Shriram Group Fd (Shriram Trasport or Shriram Cityunion).
ICRA- AA+
CRISIL – AA+
CARE – AA
WE WILL ALSO GIVE YOU THE AGENT COMMISSION.
IF ANY ONE INTERESTED PLS CONTACT.
9000165559

Me and my father have deposited big amount in Hellios & Matheson and the final interest warrent and the FD cheque got bounced back. The company is not replying to any phone calls in mumbai. Kindly tell us the procedure to get back the principal amount. Where can we complain? As well as any email id of concern person in helios?